Document Content

CIRCULAR No

CIRCULAR No. 144/1999/TT-BTC OF DECEMBER 13, 1999 PRESCRIBING THE REGIME OF LIFE INSURANCE COMMISSIONS

Pursuant to the Government�s Decree No. 100/CP of December 18, 1993 on insurance business and Decree No. 74/CP of June 14, 1997 amending and supplementing a number of articles of Decree No. 100/CP of December 18, 1993 on insurance business;

Pursuant to the Finance Ministry�s Circular No. 76-TC/TCNH of October 25, 1995 providing for the regime of insurance commissions and Circular No. 02-TC/TCNH of January 4, 1996 guiding the amendment of and supplement to the implementation of the regime of insurance commissions;

The Ministry of Finance hereby provides for the life insurance commission regime as follows:

I. GENERAL PROVISIONS

1. Subject to this Circular are insurance enterprises, insurance brokerage organizations legally established and conducting life insurance activities in Vietnam, insurance agents and collaborators that have signed insurance agency or collaboration contracts with insurance enterprises.

2. Life insurance business activities consist of the following basic types of insurance:

2.1. Term insurance means a type of life insurance characterized by the insurance being paid in a lump sum on the death of the insured within a certain period as prescribed in the insurance policy.

2.2. Pure endowment insurance is a type of life insurance characterized by the insurance being paid in a lump sum to the insured who is still alive after the expiry of the insurance period as prescribed in the insurance policy.

2.3. Combined insurance is a type of life insurance characterized by the insurance being paid on the death of the insured within the insurance period or to the insured who is still alive after the expiry of the insurance period as prescribed in the insurance policy.

2.4. Whole-life insurance is a type of life insurance characterized by the insurance being paid on the death of the insured at any point of time as prescribed in the insurance policy.

2.5. Annuity insurance is a type of life insurance characterized by the insurance being paid on a periodic basis as prescribed in the insurance policy.

2.6. Group life insurance is the provision of life insurance services to a group of people sharing a certain relation.

3. Other human insurance is a type of insurance for risks related to human beings (insurance for personal accidents, insurance for surgery costs, insurance for medical allowances...).

II. SPECIFIC PROVISIONS

1. The following subjects shall be entitled to life insurance commission:

1.1. Insurance agents and collaborators, according to the Finance Ministry�s current regulations on operations of insurance agents and collaborators.

1.2. Insurance brokerage organizations, according to the Government�s current stipulations on insurance business.

2. The following subject shall not be entitled to life insurance commission:

- Organizations and individuals that are not allowed to sign insurance agency, collaboration or brokerage contracts as prescribed by Vietnamese laws.

- Organizations and individuals that directly buy insurance.

- Officials and employees of insurance enterprises.

- Agents and collaborators that have not yet signed life insurance exploitation contracts with insurance enterprises.

3. Insurance commission rates:

3.1. For types of individual life insurance and group life insurance:

Insurance enterprises must base themselves on the index of maximum commission rates applicable to various types of life insurance prescribed in the Appendix attached to this Circular to set the commission rate for each of their life insurance products.

3.2. For other human insurance types with a period of one year or less: The maximum commission rate is equal to 10% of the all-in insurance.

3.3. For those types of life insurance not prescribed at Point 2, Section I of this Circular and other human insurance types with a period of more than one year, the insurance enterprises must submit to the Ministry of Finance for approval their commission rates before application.

4. Regarding the commission-spending level and accounting:

4.1. Regarding the commission-spending level: Basing themselves on the all-in insurance premiums and the prescribed life insurance commission rates, the insurance enterprises must make payment vouchers according to current regulations for making payments to those entitled to life insurance commissions.

The level of commissions payable to those entitled to and the level of insurance commissions used for agency management can only be spent within the limit of the maximum rate prescribed in the index of commission rates in the Appendix of this Circular.

4.2. Regarding the accounting of commission spending: The expense for life insurance commissions shall be accounted in the direct expenses for insurance business of insurance enterprises.

At the end of a fiscal year, the insurance enterprises may carry forward the remaining (unspent) commission to the following year.

5. Use of commissions:

Insurance enterprises may use life insurance commissions to make payments directly to their agents, collaborators and insurance brokerage organizations, that have brought about services for insurance enterprises, to cover such expenses as initial exploitation expense (exploration, persuasion and recommendation of clients); expense for collection of insurance premiums, expense for follow-up of insurance policies and persuasion of clients to maintain insurance policies.

In addition, insurance enterprises may also use life insurance commissions for agency management such as: Expense for the agency manager; incentives for agents to overfulfill the norms on revenues and number of insurance policies, to ensure a high rate of maintenance of insurance policies; and expense for implementation of some welfare policies and for creation of conditions for stabilizing agents� incomes.

6. Inspection work:

The Ministry of Finance shall have to inspect and supervise the observance of the regime of life insurance commissions as well as business activities of insurance enterprises and insurance brokerage organizations according to current provisions of law.

III. ORGANIZATION OF IMPLEMENTATION

1. This Circular takes effect 15 days after its signing and replaces previous documents concerning the regime of life insurance commissions.

2. Basing themselves on the contents of the Circular, the insurance enterprises shall formulate appropriate commission regimes applicable to their life insurance activities and send them to the Ministry of Finance for management and supervision.

3. All violations of the life insurance commission regime prescribed in this Circular shall be handled according to the current provisions of law.

If, in the course of implementation, any problems arise, insurance enterprises should promptly report them to the Ministry of Finance for consideration and settlement.

For the Minister of Finance

Vice Minister
TRAN VAN TA

TABLE OF MAXIMUM COMMISSION RATES APPLICABLE TO VARIOUS TYPES OF LIFE INSURANCE

(Issued together with Circular No. 144/1999/TT-BTC of December 13, 1999 of the Ministry of Finance)

I. For types of individual life insurance:

A. For separate types of insurance: Life insurance commissions shall comply with the following table:

Calculation unit: %

Maximum commission rate calculated on the basis of all-in insurance premium

Types of life insurance

Mode of periodic payment of premiums

The first year of the policy

The second year of the policy

Subsequent years of the policy

Mode of lump-sum payment of premiums

1. Term insurance

40

20

15

3

2. Pure endowment insurance

15

10

7

1.5

3. Combined insurance

- With insurance period of 10 years or less

- With insurance period of over 10 years

25

40

7

10

5

10

1.5

2

4. Whole-life insurance

30

20

15

3

5. Annuity

15

10

7

1.5

B. Combination of separate types of insurance: Life insurance commissions shall be calculated on the basis of the total commissions of the above-mentioned separate types of life insurance.

II. For group life insurance types: The maximum commission rate shall be equal to 50% of the corresponding rate applicable to the individual life insurance of the same type.-